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South Korea is set to ease restrictions for international oil traders to blend fuels at the country’s oil storage terminals in its attempt to become a trading hub in Northeast Asia, which could potentially pose a challenge to the established oil hub in Singapore.
Earlier this year, the government passed legislation that would allow international oil trading companies to blend fuels as per client specifications at the oil storage terminals. So far fuel blending at the terminals was only allowed for domestic refiners.
Even though the South Korean government is still tweaking the final guidelines and technical aspects, the country with a vast refining sector relying almost exclusively on crude oil imports is advancing the plan to ease restrictions that has been in the making since 2014.
Back then, the Ministry of Trade, Industry, and Energy said that “regulations on blending or other activities will be eased so that oil products can be mixed or processed into high value-added products with additives”, as part of the plan to turn South Korea into a Northeast Asian oil hub.
Now the president of the Ulsan Port Authority (UPA), Jong Yeol Kang, told Reuters, replying to emailed questions:
“The idea of the new regulation is to allow international oil traders to blend petroleum products and chemicals freely in bonded areas like tank terminals.”
Regulation and guidelines will be announced soon, according to Kang, who added that the feedback from oil traders has been positive so far.
South Korea’s plan could potentially challenge the supremacy of the established hub in Asia, Singapore, and possible divert some trade away from Singapore, Ellen Ruhotas, managing director at Ratio Group, a Singapore-based advisory firm specializing in bulk liquids storage, told Reuters.
“With this new capability traders could, for example, supply the near-by Japanese market with various fuels that would have otherwise come from places like Singapore, and so it would be interesting to see how that unfolds,” Ruhotas told Reuters.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.